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Thursday, April 2, 2015

"If You Are So Smart, Why Am I So Rich?" - Warren Buffett To Ambrose Evans-Pritchard?

"No, we should veto misanthropic policies within the Euro, demand
debt restructuring within the Euro, and never give them the opportunity to
claim that we opted out of the euro voluntarily. If they want us out, they
should kick us out with no help from us. In so doing, however, they will be
bringing down their own houses too…”Yanis Varoufakis, January 12, 2015.

“But to negotiate, to be taken seriously, we have to have a
convincing threat. You have to be prepared to blow a whole thing up,
simply by being intransigent if we are not taken seriously. So, this is my recommendation: Prepare for a unequivocally tough, unequivocally painful, potentially bomb negotiation".Yanis Varoufakis, January 15, 2015.

"If it turns out the Greeks leave, that may not
be a bad thing for the Euro. If everybody learns that the rules mean something
and if they come to general agreement about fiscal policy among members, or
something of the sort, that they mean business, that could be a good thing” –
Warren Buffett, April 1, 2015.

"When Warren Buffett
suggests that Europe might emerge stronger after a salutary purge of
its weak link in Greece, he confirms his own rule that you should never
dabble in matters beyond your ken". Ambrose Evans-Pritchard, April 2, 2015.

With due respect to Ambrose Evans-Pritchard, those who have bet on Warren Buffett in the past have done very well for themselves. Or as Buffett would say to an intellectual commentator: "If you are so smart, why am I so rich?"

There was a recent article in a UK newspaper about the characteristics of the world's billionaires -- purely from a statistical point of view. If I recall correctly, it showed that about 50% had no college education, and of those who had any education it was mostly in arts subjects and unrelated to business or finance. None had postgraduate education, if I am correct.

What does this tell us? Well, by contemporary standards most would be unemployable since almost all successful companies now require a Master's degree just to make an application. Secondly, it is likely that their knowledge is rather quirky and derived solely from their personal experiences. It is unlikely that they have a good grasp on the world, other than in the specific way in which they made their billions.

The third point that I would like to know about, is exactly what skills are more commonly possessed by these people. From my superficial knowledge of a few, I would guess sheer ruthlessness and a high degree of sociopathy: I doubt that intellectual detachment and ability to see the bigger picture features prominently in a single one of the world's billionaires.

So, on these grounds, I am not concerned with Warren Buffet's utterances -- other than to speculate how he thinks he will make some extra money out of the eurozone crisis. And Evans-Pritchard is quite right to tell him to mind his own business.

1) Buffett, a billionaire has an MBA from Columbia,2) Walton family all billionaires most with Grad degrees http://walmart1percent.org/family/3) Koch borthers all with grad degrees from MIT.4) Google guys

A lot of the billionaires may be dropouts but they became billionaires with their own companies, so they are definitely employable. One example is Facebook.

The statement about needing to have an MS to 'just apply' is wrong as well. So many CEOs have just BA/BS degrees.

@Anonymous. I did not do the research, and to be honest I didn't go back to the article. It may be that it was such a tiny proportion with postgrad degrees that I recalled it as zero. Do not forget that there are over 1800 dollar billionaires in the world; a few make no difference to percentages.

And as far as current labour market conditions are concerned, employers are looking for Masters degrees or very high class honours bachelors, at a minimum. The current CEOs are the last generation which did not have that sort of entry barrier.

You are just nitpicking, to be honest. Obviously, you don't like the conclusions presented.

And anyone who wants to know how the real world functions outside the wet dreams of leftist romances is encouraged to read the annual Letter to Shareholders by Warren Buffett as published on the website of Berkshire Hathaway.

@Klaus. Whereas simplistic "commonsense" utterances work very well in straightforward cases, this is not the case with a complex entity such as the eurozone or indeed the global economy. It is also not the case with the USA, which survived its massive indebtedness with the sheer size of its debts to China, which chose to invest in the USA in order to stabilise the situation. That is very different from Greece; where is Buffet's commonsense here?

And before you attack the likes of varoufakis and others "with leftist romances", you need to consider the rightist politicians who constructed the messes that we are all suffering from. They took Buffet's commonsense approach (as most politicians and businesspeople do), and decided to ignore the advice of all economists not on the gravy trains of initially banking nepotism in the 1980s and then EU corruption. Where has that got us?

The main result, I suggest, has been to enrichen the already rich and impoverish most others. No wonder Warren Buffet thinks he is so clever!

I followed Varoufakis' blog sporadically for a couple of years, but he never even mentioned that Greece has had a Balance of Payments problem. On the other hand he often claimed that Germany's current account surplus was unsustainable and that they will "run into a brick wall". Never heard him say that Greece's current account deficit was unsustainable.

The simple truth is that in the long run a country's standard of living depends on its productive capacity. Greece has been living beyond its means with a seemingly chronic current account deficit. The only way to correct this is to start start producing goods and services that other countries demand. If not, Greece has to accept a considerably lower standard of living.

During those 10 years, Greece spent 197 BEUR (!) more abroad than it earned abroad (= current account deficit). That's equivalent to roughly one GDP during the period! And specifically regarding products: Greece imported about 3.100 Euros for every 1.000 Euros which it exported. That's about the level of Cuba.

And the next link shows that Germany is by far not the sole beneficiary of Greece's deficits: Germany accounted for about 15% of Greece's current account deficit, more or less on par with China (contrary to Germany, China did not have to provide rescue financing). And Greece having financed Germany's standard of living? Well, Greek imports from Germany represented 0,7% of all German exports.

@ Xenos at 2.20Coincidentally, /Stockholm observer described to you above, in simple 'common sense utterances', what the simple truth is. No PhD in Economics required for that. The real coincidence is that /Stockholm observer used almost exactly the same words which I had used in a reply to you in a previous article recently.

BTW, and off topic, your comment that 'China chose to invest in the US to stabilize the situation' sounds wonderfully noble on the part of the Chinese but a practitioners like Warren Buffett would explain to you with 'common sense utterances' why you are wrong. China exports to the US and there is no way for them to get paid by the US in anything other than the USD. Every USD anywhere in the world eventually has to reside in an account with a domestic American bank because that is the only USD clearing in the world. So by definition, China gets for its USD either American bank deposits, US Treasuries or other investments in the US. That's mathematics and not economics (read Varoufakis' Global Minotaur). And to get back to Buffett's squander-/thriftville, at the end of the day, China may own all of Manhattan's real estate and Americans would be paying rent for it.

Of course, China could sell its USD against other currencies. Who suffers? Right, China itself. The USD would weaken and buy less Chinese exports and the existing USD holdings of China would devalue.

@Klaus and Stockholm obs. I don't disagree with anything stated here. But all of this is post facto: it is very easy to describe what has happened, and explain the motivations or realities. It is quite different to predict and be prepared to invest in those predictions, such is your confidence in your own skills.

The Greek debt was clearly unsustainable without the eurozone. varoufakis knew this, even if he did not state it openly. In the past, Greek debt was financed by various techniques, of which the most obvious was printing money. By the time of the Simitis government (and adherence to the Snake ERM) this was less easy, and they started to play with Goldman Sachs for dubious strategies. This is not about commonsense, it is about economics. It is possible to engage in deficit spending over a sustained period, but you cannot be competitive or attract significant FDI with high inflation, an overextended public sector and a weak private sector. But at least in those days, the B.o.p. was fairly healthy.

The eurozone was a massive paradigm shift for Greece, and I do not recall any financiers, investment analysts or politicians commenting on the dangers. It was left to economists, of which Varoufakis was one of the few to point out that the Greek economy was unlikely to fare well (ceteris paribus). I also had grave doubts at the time -- but was not working on macroeconomic issues of that sort.

"that 'China chose to invest in the US to stabilize the situation' sounds wonderfully noble on the part of the Chinese but a practitioners like Warren Buffett would explain to you with 'common sense utterances' why you are wrong. " etc. This contains the fallacy that the Chinese take decisions based on economics and not politics. To anybody that knows a bit about the Chinese society this is a joke.The Chinese leadership understands only politics and history and it is therefore scared shitless (pardonmy french) of the perennial bugbear of China-large scale instability. Chinese history is rife with situations where uneven economic developement (especially between the seashore and inland areas) led to civil war. Theyare also still smarting from the opium wars, which were of colossal,global historical importance: it was the first time in history that a group of foreigners came in contact with the Chinese and was not sinified.To the Chinese that was the most shocking and transforming moment in history. The first thought of a Chinesepolitician will be to stabilise the situation. This is not noble(this is orientalism basically) but theresult of fear. I personally believe that the Chinese leadership chose the dollar based only on the fact that the US was the most powerful state on earth and the only one worthy of China. As for the opinion that any dollar sell off will hurt China more than the US is naive. If something like thathappens the US bond and currency market will collapse and the resulting turmoil will politically destroy the US president and its party while doing minimal damage to the Chinese communist party thatwill present such an event as revenge for the historical grievances of China against the West. This seems to be the threat that forced GW Bush to change course and save the federal mortrage banks with an injection of federal cash. As Imention below most US citizens really believe in US exceptionalism and believe that the rest of theworld is or should be like them. These "common sense" explanations are nothing more than a non-offensiveexposition of exceptionalism, acceptable during Pax Americana but pretty irrelevant after 1990.

Moving to the main post, I am not sure about its purpose. If it to compare FM Varoufakis to W. Buffett or A. Evans-Pritchard then there is no need: FM Varoufakis is an unstable narcissistic personality that will probably be the downfall of the political ideology of the Greek left, not only of SYRIZA.Assuming of course that no other Greek minister takes the lead in buffoonery. It seems, for example, that the duet of Defense Minister Kammenos and Developement Minister Lafazanis are giving Mr Varoufakis a run for his money as the top clown.Remember that during the New York 25 of March celebrations for the Greek nationalday Mr Kammenos offered 75% of the Greek gas deposits to the US -in public, talking to journalists-and a couple of day later Mr. Lafazanis offered the same deposits to the Russians. Any statement or utterance out of such a government cannot be taken seriously. At this time in Greece we are faced not with a corrupt or incompetent government but with practically no government. With a couple of exceptions, comparing this lot with any moderately serious person is a no contest.

However if the purpose of the post is to promote the position that W. Buffett knows what he istalking about then we are dealing with sloppy thinking. First of all how do we know that Mr. Buffettis not actively sorting the euro and try to talk it down? Secondly what exactly is meant with thephrase "those who have bet on Warren Buffett in the past have done very well for themselves". Thisapplies only to shareholders of Berksire Hathaway. Are we implying here that Greece must buy Berksireshares? Or are we talking about his personal life? (Be careful-he was keeping two women at a time andGreek girls are very vindictive). I cannot see how following slavishly (tracking it) the investmentchoices of Berksire Hathaway can do anything but put money in Berksire's shareholders' pockets. Keepin mind that on his own (Buffett's) admission he is just following on B. Graham's footsteps. If the statement becomes that anybody that followed B. Graham's advice has done very good for himself thenI agree. And Greece would do very well to follow B. Graham's advice. Moving on to the Buffett Bloomberg's article one must note that we are mostly dealing with platitudes and the peculiar Americanbelief that they are somehow exceptional and not influenced by the rest of the world. Not much in there.Now let us move to the A. Evans-Pritchard article. It contains a gem:"Willem Buiter, Citigroup’s chief economist, warns that Greece faces an “economic show of horrors” ifit returns to the drachma, but it will not be a pleasant affair for Europe either. “Monetary union ismeant to be unbreakable and irrevocable. If it is broken, and if it is revoked, the question willarise over which country is next,” Translation: Greece will never leave the euro-period. The stakesare too high. The above statement is the polite description of the political realities. The plain speakingdescription comes from a recent P. Krugman article in the NY Times. It contains a loaded phrase: the eurois their currency and our problem. This is not a random phrase.It mirrors the phrase used by Reagan's Treasury Secretary Baker. At a time that the Dollar was very low and the European governments werecomplaining he came up with the retort: The dollar is our currency and your problem. Translation: themajor utility of the Euro is insulating the EU from problems originating in the US (including majorfinancial operations like Mr. Buffett's.) The political utility of this is both obvious and colossal. So Greece will never be allowed to leave the Euro, even if Greece decides to commit suicide and attemps to leave on its own. How the Eurozone will stop such a move?Easy: a) To print currency specialist machines and raw materials are necessary-usually from DeLaRue. Howeverin order to buy both you need permission from the BIS in Switzerland. If the ECB says no, no it will be. b) In order to function any new currency needs to connect to the international payment system (Visa,SWIFT, Foreign exchange etc) If the ECB and the Euro zone banks say no to these connections then thecountry will simply become N. Korea. Given the profile of Greek trade this will be swift. This is aclassical case of technical developements having serious political repercussions. If we were in the 30'sunder the gold standard, it would have been possible to ignore the Eurozone, as Metaxas did with thesovereign loans he received from a belgian bank:he stopped paying the loan but the means of payment(gold) was already in Greece and the monetary/payment system continued to function. In our times themonetary/payment system will simply collapse, making an escape impossible. In conclusion:either W. Buffett is ignorant of what really is going on or he has ulterior motives.In either case we must steer clear. And now to the phrase "If you are so clever how come I am so rich?" This is thinking so sloppythat somebody does not know where to start.

a)First of all we have the brutal put down that results from the Snowden leaks: Snowden proved that all US giants of IT grew by selling their clients private lives to the NSA. So, Mr Buffett is probablydoing something similar, his billions are awarded by the intelligence agencies and he is just an immoralhack. In actual fact this argument is why the Snowden leaks became so controversial: it drives a stakethrough the most cherished part of the american dream, that anybody can very rich on merit with hard work, intelligence and a bit of luck. Instead, just like the Soviet Union, billions are awarded by the security apparatus. b) Many drug lords and similar are very rich and it will be very profitable for everybody who sticksaround them. Should we copy their behaviour and listen to their advice? c) Mr Buffett started his life very rich by most standards. His father was a major politician and the owner of a very succesful investment management firm. So somebody can make a serious argumentabout simply using his connections competently and nothing more. d) Mr Buffett, unlike his father, is an one trick pony. He has never tried anything outside the realmof investing (eg politics like his father). So either he tried and failed or he feels inadequate. e) Many US ultra rich make their money in an environment where all important political matters have been settled. This makes their understanding of other places obviously faulty. G.W. Bush and his richfriends are a classical example. To accept that W. Buffett is different needs more arguments than money. f) The last argument is subtle. If we accept that W. Buffett should be listened to because of his moneypile then we are suggesting that sage-like qualities can consistently beat the market. This constitutesa wholesale rejection not only of the Efficient Market Hypothesis but of every non-socialist market theory.In such a case the SYRIZA position about the markets (that they are an oppressive mechanism)become rational. The above are not to say that Mr. Buffett is not be admired for his considerable achievements. They arearguments against believing that we must take his words as anything more than market play or PR. I also agree with Xenos: based on my experience and on my readings most of these people are psychotic.The little that I know about Buffett's personal life agrees with that assesment. Finally I attach what I believe is the best article about politics I have ever seen. http://www.theguardian.com/science/brain-flapping/2015/apr/02/democracy-psychology-idiots-election. We should all read it and try to apply it to our beliefs(including the reference links)It is painfulbut very illuminating. It will answer the question as to why people believe, follow or listen toinadequate leaders of any sort.

They warnings about Greece's entry were all over at the time. If I recall, it was finally the French/German political argument that the cradle of democracy could not be left out of the Eurozone. Also I seem to recall that there was a bit of blackmailing the Germans on the part of Greece (threat of asset confiscations).

@Klaus: I really have no idea what you are talking about. Delors was one of the rare political figures in Europe who knew what he was doing; by the 1990s he had gone. All of these decisions relating to the eurozone were made in the very late 1990s. I am not talking specifically about Greece even: the whole project was in the end predicated on the idea of getting weak economies of the South in the euro in order to keep down its value and expand its coverage and making it a global currency power.

As far as Greece is concerned, it was very clear that all politicians across Europe were happy for Greece to enter. I have stated repeatedly, falling on deaf ears, how the northern European countries rejected the expert economists' report, and bribed the Governor of the Bank of Greece with a promise of the very well paid deputy governorship of the ECB. All economists within the political domain were told to shut up, and do as they were told. Only independent commentators were dissenting. The idea that Greece had to put pressure on anyone is nothing other than German propaganda. Why do you think so many weaker economies were rapidly included in the euro? Do you think they all put pressure on Germany? This is a ludicrous assertion.

We are talking here about northern European style corruption and anti-democratic political management.

" it was finally the French/German political argument that the cradle of democracy could not be left out of the Eurozone."

Mr. Kastner,

At some point you should abbandon romanticism and the facades of such nature politicians use to feed the masses and look up the term geopolitics. It's hilarious to actually read that they took Greece on, because "craddle of civilization".Greece was the only "stable" country in the Balkans, transit area for EU pipelines, strategically positioned in SE Balkans and with a new PM (Simitis), who was fully germanized (his brother, also german bred, is still professor in german university). In Greece, it was common article in newspapers, the "weapons for EU favours" exchange. Greece was the only NATO country spending over 4% of GDP annually in defence. As soon as Simitis came to power, Greece started an unprecedented weapons deal, with no competition. Direct goverment deals on contracts to german and less to french companies. Before 1996, the Americans were getting the money. After 1996, Simitis shifted abruptly the balance. Do you know that the greek army was equipped with Mercedes 1 1/4 ton mini trucks? Mercedes for the army! The craddle of civilization... Do you also believe in Santa Claus?

Note: In these years, the greek expenditure actually declined. The big boom was 1996-2004 (Simitis administration). You don't leave out of the club, the 5th best arms client in the world, specially when he buys YOUR weapons, do you? After all, after the fall of Soviet Union, who buys weapons anymore? How are the weapons industry manage? Before the introduction of Eurofighter and Rafale in Germany and France respectively, the greek airforce could wipe out either the french or german airforce in 2 weeks. Never mind that the greek army had like x4 the number of tanks of either and newer model of the german Leopard 2 tank than the german army itself.

Here's how politics actually play in the real world, Mr. Kastner, in the "i do you a favour buying, you do me a favour later):

Little Greece, singlehandidly, kept open the Lockheed Martin F-16 factory in Fort Worth, Texas. Because you know how it is, countries, since Russia collapsed in 1990, weren't eager to buy new planes anymore.

"Nisbit said the importance of yesterday's agreement is that it will help Lockheed Martin keep its F-16 production line in Fort Worth, Texas, running until at least 2001.

"This will help them get even more sales in the future," he said. "It's very rare and very expensive for a company to restart an aircraft production line once it has shut down."

It is most certainly the case that Germany in particular, but also france and the UK, are caught up in the corruption and big money of weapons dealing. In the case of Germany, Schaeuble is particularly relevant as someone very involved with this dirty business.

And of course it is common knowledge that Germany forced Greece to buy expensive submarines and other weapons from it as an alleged "quid pro quo" for the first memorandum. The idea that the Germans are not corrupt is so fanciful that I can only laugh!

The arms deals in Greece were always part of the "quid pro quo" in foreign policy. This was particular evident even to the unaware reader, back in the 80s, when Papandreou made the "deal of the century", splitting the purchase of 80 aircrafts between USA (the traditional supplier) and France (which he considered the european alternative that would allow to be somewhat free of US pressure and dependence on spare parts). In the 90s, this policy became more apparent, to the point that foreign weapons representatives were visiting the minister of Defence or the PM accompanied by the local ambassadors. They were also hiring local greek representatives to lobby to the politicians. The big contracts were always part of political bargain and favours, especially in the euro-entry period. The weapons deals were a sort of expected return. Like in "we buy more francogerman weapons, give us more agricultural funds". Or "we will buy this submarine, you help Cyprus get admitted in the euro area". If one was reading defence columnists in newspapers, there was always the paragraph about the political pressures and "who can give what on political level". It was like an "added value" to the contract. It is no coincidence that Britain miserably failed to sell anything of value to Greece since 1974, except for 6 fast attack crafts, when Greece needed to appease British objections into accepting Cyprus to the EU. The Brits got their "one off" deal and never saw a sale in Greece again, contrary to Germany and France. The submarine deal, was again, signed by Akis Tsohatzopoulos (Simitis period), for a submarine that was only on paper. There wasn't even a prototype built. The prototype was the 1st greek sub and had many problems. The contract though was so heavily favouring the german part, that we ended up buying it. Another less famous deal is the NH-90 helicopters. Again, never tested before, many countries ordered it. Delays for years, only 4 can fly to this day. Expensive as hell too. Still they get orders, because the political benefits or added value, hold true for several smaller countries. In Greece we simply speak openly about it.

Big boy Kammenos and his national-socialist SYRIZA comrades must be very happy.

"It should be noted that Mr. Dritsas [SYRIZA activist and Superminister], who is among those signing the agreement, was a fierce critic of weapons expenditures during the past years, when New Democracy and PASOK were in power."

Translation: "Geopolitical reasons. Political and economic circles from the goverment, say that the swift direct procurement to the Americans, is connected to wider geopolitical purposes of forming alliances"... "Only a few days earlier, the MoD revelead that in his discussion with Mrs Nuland, he discussed the eventuality of joint exploitation of possible gas and oil reserves in the Aegeam on a 70 (GR) to 30% (USA) ratio.

Dumb-proof translation: Tsipras wants to thank Obama for his support and wants to have good relations with USA in case things go south with the EU. He wants to play both sides of the fence, just like PASOK did in the 80s.

The deal itself is an operational scandal. They take aircrafts that are out of production since 1988, with 35 years on their back, which will be delivered in 7 years from now and with the prospect of 20 more years of operational use. This means that they claim that the aircrafts will be retired after 62 years of operation and paying 100 million $ for each airplane. This has never happened in any airforce in the world, ever. It's simply a Tsipras gift to Lockheed Martin/Obama.

How much would a brand new alternative cost? Half the price!

1) Granted, the following doesn't come with full features as it lacks ASW (anti-submarine warfare) equipment, still, the addition can't possibly justify 50 million difference. However, this would mean giving the money to EADS (Merkel, Olande).

MADRID, Spain, Feb. 18 /PRNewswire-FirstCall/ -- Lockheed Martin (NYSE: LMT) today awarded a $87.4 million contract for two CN-235-300M Medium Range Maritime Patrol Aircraft to European Aeronautic Defence and Space Company (EADS), in support of the U.S. Coast Guard's Integrated Deepwater System program.

The above means, half the price. Even if we assume 10 mln more for ASW equipment, it's still much cheaper than what Tsipras will pay.

2) Option 2. Give the money to the Italians. But Italy doesn't count much anywhere in foreign policy, which is why Italy has always managed to sell little to nothing in Greece, so again, why would Tsipras just give the money to Renzi?

If this was signed by Samaras, SYRIZA would now be filling the newspapers about scandalous procurement and hypocritic goverment that gives 200 million euros to the "humanitarian crisis" of the poor and 500 million euros to USA with direct procurement for "weapons that Greece doesn't need at scandalous prices for aircrafts that normally would be scrap metal".

"But SYRIZA is riding the wave of popularity and nothing can touch it."I wonder for how long they can ride that wave. The Greeks certainly cannot be that stupid to tolerate this bunch of Marxist idiots much longer. Even spoiled anarchist kids are making fools of the government.

Let's be honest: If Syriza pays for the sympathy of the United States, it may be a good safeguard against threats from Turkey, at least one intelligent move.Syriza was clever enough not only to ruin the trust and relation with most european states but at the same time also to provoke its non lovend neighbor Turkey - while also Erdogan is getting more and more "strange". The diplomatic abilities of this government are quite breathtaking.

A Greece with a perspective heading toward chaotic bancrupt and getting close of disintegration may look like the perfect victim for imperialistic turkish dreams. After intimidating Europe and Turkey it may be wise to rebuilding the relations to the United States as they are probably on of few guys in the room Turkey will not really want to bulk with.

By the way: Anyone really expect Greece paying bills? If they dont pay cash on hands now, I would better calculate with total depreciation. I could also imagine parts of the money are covered by american governmental bonds and there already internally booked as "future american military aid for Greece", as Americans can also see the signs at the wall.

There is no scandal for Greeks that their politicians believe they have to buy arms from America or Germany: the scandal is if it is actually true that such things are demanded by those countries. We know that it is in the case of Germany.

And if you want actual scandal, have a look at this news:

Banker tied to Siemens scandal in Greek custodyA Swiss-French banker wanted in connection with the Siemens cash-for-contracts scandal and a string of allegedly corrupt defense deals is in Greek custody, authorities said Monday.http://ekathimerini.com/4dcgi/_w_articles_wsite1_1_06/04/2015_548879

Weapons deals, are usually a scandal. Common people and politicians have complete ignorance on the matter, so one can tell them whatever they want to convince them that "it is a need". In Greece, here's how things have always worked:1) The 3 branches of the armed forces make a list of prioritized requirements and technical requirements.2) The Minister of Defence, either makes a direct recommendation of 1 system or declares a competition.3) The final decision (including rigging the competition requirements to make "honestly" win the one you want), is taken by the KYSEA comittee. Τhe KYSEA is composed by:- The Prime Minister (president)- The minister of Defense.- The minister of Foreigh Affairs- The deputee minister of interior.- The deputee finance minister.- The Chief of Staffs (army).

* Possible bribes are included in the final price of contract. For instance, something that would normally be sold 20, is sold at 21 million, the 1 million being the bribe. This way everyone is happy. The politicians gets his bribe and the company selling is bribing, but getting the money back from the other pocket through the contract. The state is paying really for the bribes.

Why all this? Because the finance ministry must give the money, the PM and the foreign minister ensure that the money goes to the "right direction" geopolitically speaking, the remaining 2 are bystanders to share responsibility. Bottom line is, the final decision on what weapons system will be purchased, is always political. The goverment claims that they need "urgently" these aircrafts for patroling the Aegean, to prohibit to Turkey to take over SAR operations. This claim falls on its feet however, since the deliveries of the aircrafts are 7,5 years from now. If someone has "urgent" need, he leases 1 aircraft now and puts an order on 3-4 new aircrafts at lower prices (Turkey herself uses the CN-235 and Alenia ATR-72). Instead, Tsipras signs for 500 million, to upgrade 5 aircrafts that have 35 years of age (this is the usual limit of operation, where aircrafts are withdrawn from service worldwide), because they say "are badly needed" and so after 7,5 years, they will gain another 20 years of service, finally getting retired at 62 years. It is as ridiculous of an explanation as it can get, but folks on the street don't know about details, so they defend Tsipras for "patriotic purchase".

Weapons deals are always like that... People can't judge, don't know, small countries try to lick their bigger geopolitical brothers.

Since the blog owner is Austrian, here's an example of politically oriented purchase, which by operational criteria, is scandalous.

Did Austria need this aircraft? Categorically no. It is the most expensive aircraft in the market and ridiculously high maintenance for a small country like Austria. With the same money, Austria could have gotten the best F16 model in higher numbers (about 30), with half the maintenance costs and...superior capabilities. The Tranche1 block 5s, are now no longer used by the consorcium countries that built it! They had many problems and limitations, a bit like prototype stages. The consorcium wanted desperate foreign clients. Austria being Germany's little brother, made the brave step to be the 1st foreign buyer of the new aircraft. The Eurofigher is too big for Austria (has no real threat), the early model is close to useless for real war and it's too expensive to operate. A small country like Austria should have gotten single engine aircraft, like F16 or the swedish JAS39 Gripen, which are cheap and multipurpose. The Eurofighter was built as heavy air superiority fighter, to fight russian heavy Su-35 variants, which Austria will never see and in such small numbers, they can't even form a squadron.

Before Austria, the efforts had naturally concentrated to the usual suspect: Simitis! Who being a faithful german acolyte, had signed a LOA for 60 (+option for 30) Eurofighters, again, early models that now would need upgrade.

This would have been a scandal that would make the 2 bln submarine deal pale in comparison. Fortunately, the expenses for the Olympics delayed the final contract and when ND came to power, scrapped the deal, ordering more F16s instead for much cheaper. Two engine aircrafts are very expensive even for daily flights. Costs go from 8000$ per flying hour for F16 to 18-20.000$ for Eurofighter.

Austria was used as "backup plan" after Greece didn't proceed with the purchase. Because it's important to sell to foreign countries. One clause often put in foreign competitions, is that "the aircraft is in use by another airforce" (aside the one of the manufacturer's country". So having no customers outside the consorcium, was very bad for business. In fact, the Eurofighter only managed to sell after many years to the Saudis, under rumours of bribery:

Buffett's public statements on investing are often quite witty and interesting but usually they are more self promotional than a reflection of his actual investment strategy. Find it somewhat bigot to tell the public that derivatives are weapons of mass destruction while his own strategy involves a good portion of just theses weapons.

Regarding public policy I find his contributions to be in the same league as those from Varoufakis or Pritchard. Besides his idea to have billionaires pay a little more taxes I have not heart much from him.

A rather late comment concerning Xenos statement about the Germans forcing the Greeks to buy the subs. This is not correct. The buying of the subs was originally a Greek idea: these subs are a game changer as they are undetectable (they have no moving parts bar the propeller, no combustion engines and can stay submerged for weeks )in the Aegean and therefore ideal for bottling the Turkish fleet in the Marmara Sea. This will make any effort by the Turkish army to land on a Greek island extremely difficult if not impossible. With this in mind the Greek High Command statrted the process (One of the officers that signed the original recommendation is a friend). The problem started afterwards: the idea was for Greece to be the launch customer ie the first to buy (the German Navy bought a more advanced version, not a identical one). Launch customers pay a lot less but they undertake serious technological risk. It seems that the Greek side was not ready for such technological adventures and the extra developement money required were not forthcoming. This blocked the project and influenced the ability of the Germans to sell more of them. It also seems that launch customers have different treatment in the matter of bribes. At 2 bil euros per piece both the overall money and the bribes are substantial. It seems that the, difficult to sort out, technological problems developed into a full blown Greek-German disagreement. As far as other weapon systems are concerned I do not know any details. However Greeks do not need much pressure to buy useless weapons, as the bribes are more than welcomed. So I am not sure who pressured whom: In Greece we call this "Τραβάτε με και ας κλαίω"-Force me to do it even if I cry.

It is incorrect that the 1st customer pays less! Exactly the opposite! The first customer pays MORE than any subsequent customer, because he pays also more development costs. The german navy bought U212. The U214 was proposed to Greece, to adapt better to the Aegean (more diving depth than the german, magnetic steel vs non magnetic of the german U212). So who would pay for the development costs? Germany for a sub that didn't order for herself? Greece would pay!

Turkey later ordered 6 of the same subs we did, for... 2 bln euros. Practically Turkey got 2 more subs for the same money.

"On 1 July 2011, the 2 billion euros order for six U 214 submarine material packages placed with ThyssenKrupp Marine Systems by Turkey entered into force with receipt of the advance payment."

http://en.wikipedia.org/wiki/Type_214_submarine#Turkey

Read here how development costs go:http://www.forbes.com/sites/toddharrison/2015/03/30/pentagon-weapons-acquisition-reform/

The more new customers buy, the less they pay for the original development costs, because it is likely, they have been extinguished in the meantime by the first customers (all hail Greece!).

The U214 is good submarine, but the scenario that will bottle up the turkish fleet doesn't hold much water, since in any possible crisis, Turkey will be the one to choose where and when and you can be sure that they will have deployed their fleet before firing a shot. The argument of bottling them up to the Dardanelles would hold water, only if Greece was prepared to initiate hostilities by surprise, catching them in the sleep and thus with their fleet still in the Bosporous. Which we know it's not going to happen...

Greece should have never signed for a submarine, that had no existing prototype. Especially for such a costly system. It's like going directly to the Ferrari factory, pay cash for a model that doesn't exist but on a drawing paper and when you go to the street, you suddenly realize that it can't hold track on curves, that the center of balance is wrong, etc. (The first U214, was pending over 45 degrees on surface under high wave sea, they had to move tons of ballast to the lower part, the electrical wiring was redone many times, they had to reroute entire rooms with new wire layout and so on).

P.S.: The U214 costed us 500 mln a piece. 2bln was the cost for all 4.

I also remind what happened in 2010, when after years of dispute, we agreed to accept the famous Papanikolis, which Thyssen was claiming since 2006 that was "perfectly fine". In its maiden voyage from Kiel to Piraeus, the submarine "lost" parts of its glass fabric coating (peeled off), due to encountering "bad weather". The parts were detached from the sub. The Greek Navy denied that it also lost it's anti-mine sonar, as the article claims.

This was HDW's advertisement for the 1st greek U214:"Robust, reliable":

http://postimg.org/image/aep7636wn/

Here's the photo of the same submarine after arriving in Greece and getting repaired for the official approval ceremony in 2010:

http://postimg.org/image/xsfxbs6en/

One can notice a darker colour of a rectangular portion of the conning tower. The darker colour is because the piece is new, to replace the part that was detached and lost at sea while the sub travelled from Kiel to Athens. Robust, reliable... These are slates of a fiberglass-like material, that protect the steel hull and give to the submarine a small signature to enemy sonars (they don't reflect sound much).